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Wednesday, August 28

Some of the largest macro moves in the market today include: US Dollar Index +0.5%. Copper -1.9%. Gold -1.0%. 

The most significant market event currently is the anticipation surrounding Nvidia's earnings report, which will be released after today's US market close. This announcement holds substantial weight due to its potential impact on AI spending trends and broader investor sentiment in technology stocks.

In economic data releases, mortgage rates in the United States have dropped to their lowest level since April 2023 at 6.44%, driven by declining long-dated Treasury yields amid expectations of Federal Reserve rate cuts. Additionally, Eurozone lending growth has reached an eight-month high with a notable increase in credit extended to households and companies.

Lastly, geopolitical tensions continue influencing commodity markets as evidenced by recent declines in crude oil inventories that fell short of estimates despite ongoing supply concerns from Libya’s production issues.

Gold (XAU/USD) [-1.1%]
Gold's price has declined since Tuesday, currently hovering just below 2,530. The recent three-day uptrend has stalled, with technical indicators hinting at the potential for a new lifetime high. Market caution prevails as traders await comments from Federal Reserve officials and earnings reports from companies like Nvidia. Geopolitical tensions in the Middle East have contributed to a risk-off sentiment, increasing demand for the US dollar, which may limit gold's upside. Current expectations show a 32% chance of a 50 basis points rate cut in September and a 68% probability for a 25 basis points cut. Gold remains supported above 2,500, with key resistance levels at 2,532 and 2,550.

Invesco DB US Dollar Index Bullish Fund (UUP) [+0.6%]
The Invesco DB US Dollar Index Bullish Fund (UUP) has seen a price increase of 0.5% in pre-market trading on Wednesday. The U.S. dollar index rose, supported by a stronger dollar amid concerns over weak Chinese demand and risks of broader economic slowdown affecting commodities. Recent comments from Federal Reserve officials suggested potential interest rate cuts due to easing inflation pressures. Additionally, consumer confidence improved, as indicated by an increase in The Conference Board's index for August. Economic indicators presented a mixed outlook, with the S&P CoreLogic Case-Shiller home price index rising year-over-year, while the FHFA house price index unexpectedly declined. Asian markets exhibited mixed performance, with Japan's Nikkei 225 slightly up and China's Shanghai Composite down.

NBIX |-15.7%|-2.0B
Neurocrine Biosciences, Inc. reported positive top-line data from its Phase 2 clinical study of NBI-1117568 for treating schizophrenia, achieving a statistically significant reduction in the Positive and Negative Syndrome Scale (PANSS) total score. The study met its primary endpoint with a placebo-adjusted mean reduction of 7.5 points at the 20 mg dose. Despite this favorable outcome and plans to advance NBI-1117568 into Phase 3 development early next year, shares are trading significantly lower, with a premarket decline of 17%. The drug was found to be generally safe and well-tolerated, showing an 18.2-point reduction from baseline at week six.

RY |+2.5%|+4.2B
Royal Bank of Canada reported Q3 earnings, revealing an adjusted EPS of C$2.38, surpassing estimates of C$2.16. Total revenue reached C$10.69 billion, exceeding the consensus of C$10.56 billion. The bank's personal and commercial banking net income increased by 17% year-over-year to C$2.49 billion, while capital markets net income rose by 23% to C$1.17 billion. Wealth management net income saw a significant increase of 30%, totaling C$862 million. Additionally, the CEO announced an anticipated rise in share buybacks in upcoming quarters. The quarterly dividend was declared at C$1.42 per share, payable on November 22, 2024. Following this news, Royal Bank of Canada’s stock price has moved up by 2.5% since Tuesday.

SJM |-3.8% | -467.8M
J.M. Smucker Co. has revised its fiscal 2025 guidance, now anticipating net sales growth between 8.5% and 9.5%, a decrease from the previous forecast of 9.5% to 10.5%. Adjusted earnings per share are expected to range from 9.60 to 10.00, down from an earlier estimate of 9.80 to 10.20. This adjustment reflects challenges from inflation and changing consumer behaviors in key categories such as coffee, pet snacks, and sweet baked goods. The company reported first-quarter net income of 349.5 million, or 1.74 per share, a slight decline from 1.79 per share in the prior year. Despite an 18% increase in net sales to 2.13 billion, the results fell short of analyst expectations, contributing to negative market sentiment. Additionally, the company reported Q1 earnings with actual EPS at 2.44, exceeding expectations of 2.17, while revenues met forecasts at 2.1 billion.

SMCI |-2.5% | -783.9M
Super Micro Computer Inc has come under scrutiny amid allegations of being a "bag of fraud," raising concerns about its credibility. The stock has faced pressure from new short seller reports, which have contributed to an increase in short interest by 2.3 million shares between July 31 and August 15. This uptick in short interest coincides with a report from Hindenburg Research, which outlines serious allegations regarding the company's revenue recognition practices, undisclosed related party transactions, and potential violations of Russian sanctions. The report also references a troubling history of accounting issues, including a lawsuit from a former executive alleging ongoing fraudulent practices. Additionally, there are concerns regarding internal inefficiencies and declining customer satisfaction, suggesting a weakening competitive position for the company.

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